Last year Chancellor, Philip Hammond, pledged to help out first time buyers with the introduction of stamp duty cuts but how far has this actually gone? How much has it helped first time buyers in the last year?
According to the Spring Statement in March, 60,000 first time buyers have benefited from the stamp duty reforms. As it currently stands, there is no stamp duty to be paid on properties worth up to £300,000 and none to be paid on the first £300,000 on properties worth up to £500,000. The stamp duty reform was first announced in the last budget but it is only now that we have started to see results. So, what are the results?
It is difficult to say what the real benefits are or whether the housing market really has improved for first time buyers and this is because it is unclear how much first time buyers are spending on housing. Philip Hammond praised these 60,000 first time buyers but who are they? What properties are they buying? For many, they will be buying housing well below the UK average which means any stamp duty saving is likely to be very little. Buying a house somewhere in between the £300,000 and £500,000 mark is going to be highly unlikely for first time buyers as most are struggling to even pool together enough money for a deposit on a house.
One thing that has been noted about first time buyers in the last year is that they are decreasing. As of October last year the proportion of first time buyers fell to 22%, the lowest it has been since February last year. The main issue isn’t the number of properties available as this has increased marginally. The main issue is housing affordability for young people. In general, properties have increased in price over the last year, albeit a small increase; this, in turn, has affected how much the government is set to spend on stamp duty relief as it is costing more than initially expected.
Research from the Officer for Budget responsibility revealed that higher property prices meant relief is costing more than was first thought. In addition, they predicted that the cost to the Treasury will rise to £520m in 2018-19 and then rise again to £670m in 2022-23. The problem is that if there is going to be a continued increased in demand from first time buyers after the results of the stamp duty relief then the government needs to make sure that there is sufficient housing to meet the demand, otherwise we’ll see house prices go up and up and up. Time will only tell if the higher average prices we’re seeing at the moment is temporary or not.